DoD's $3.2M aircraft manufacturing contract awarded to Lockheed Martin shows fair value despite limited competition

Contract Overview

Contract Amount: $32,015,586 ($32.0M)

Contractor: Lockheed Martin Corporation

Awarding Agency: Department of Defense

Start Date: 2020-05-26

End Date: 2021-06-30

Contract Duration: 400 days

Daily Burn Rate: $80.0K/day

Competition Type: NOT COMPETED

Number of Offers Received: 1

Pricing Type: COST PLUS FIXED FEE

Sector: Defense

Official Description: DMS MANAGEMENT JUL2019-JUN2020

Place of Performance

Location: FORT WORTH, TARRANT County, TEXAS, 76108

State: Texas Government Spending

Plain-Language Summary

Department of Defense obligated $32.0 million to LOCKHEED MARTIN CORPORATION for work described as: DMS MANAGEMENT JUL2019-JUN2020 Key points: 1. Contract value appears reasonable given the specialized nature of aircraft manufacturing. 2. Limited competition may have impacted price discovery, potentially leading to higher costs. 3. Performance risk is moderate, typical for complex defense manufacturing projects. 4. This contract aligns with the Navy's ongoing needs for specialized aircraft components. 5. The defense sector sees significant investment in aircraft manufacturing, with this contract being a small part of that ecosystem.

Value Assessment

Rating: good

The contract's value of approximately $3.2 million over 13 months appears to be within a reasonable range for specialized aircraft manufacturing services. Benchmarking against similar, albeit less complex, aircraft component contracts suggests that the pricing is not excessively high. However, without detailed cost breakdowns or comparisons to direct competitors for identical services, a definitive assessment of 'excellent' value is challenging. The fixed-fee component provides some cost control, but the overall cost-plus structure warrants continued monitoring.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

This contract was awarded under a limited competition, suggesting that only a select number of potential bidders were solicited. While the specific reasons for this limitation are not detailed, it could be due to the specialized nature of the required aircraft manufacturing or existing relationships with specific contractors. The limited pool of bidders means that the government may not have benefited from the full spectrum of market competition, potentially impacting the final price and innovation.

Taxpayer Impact: Limited competition can mean taxpayers may not be getting the absolute best price possible, as the full competitive pressure of an open market was not applied.

Public Impact

The Department of the Navy benefits from the acquisition of critical aircraft manufacturing services. This contract supports the production and delivery of specialized aircraft components essential for defense operations. The primary geographic impact is likely within Texas, where the contractor is located. Workforce implications include employment for skilled manufacturing and engineering professionals at Lockheed Martin.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns inherent in cost-plus contracts.
Limited competition may result in less favorable pricing for taxpayers.
Dependence on a single large contractor for critical components.

Positive Signals

Award to a well-established defense contractor with a strong track record.
Contract duration provides stability for production planning.
Fixed fee component offers some level of cost predictability.

Sector Analysis

The aircraft manufacturing sector is a critical component of the broader aerospace and defense industry, characterized by high barriers to entry, significant R&D investment, and long production cycles. This contract, valued at $3.2 million, falls within the typical range for specialized component manufacturing or modification services. Major players like Lockheed Martin dominate this space, often securing contracts through competitive bidding or sole-source awards for highly specialized capabilities. Spending in this sector is driven by national security needs and technological advancements.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses. As a large prime contractor, Lockheed Martin's subcontracting practices will determine the extent of small business involvement. Without explicit set-aside goals or reporting, the direct impact on the small business ecosystem is likely minimal, though they may participate indirectly through Lockheed Martin's supply chain.

Oversight & Accountability

Oversight for this contract would typically be managed by the Department of the Navy's contracting officers and program managers. Performance monitoring, quality assurance, and financial reviews are standard oversight mechanisms. Transparency is generally maintained through contract reporting systems, though detailed cost justifications for cost-plus contracts may be less publicly accessible. The Inspector General's office for the Department of Defense would have jurisdiction over potential fraud, waste, or abuse.

Related Government Programs

Aircraft Manufacturing
Defense Procurement
Department of the Navy Contracts
Lockheed Martin Contracts

Risk Flags

Limited competition may lead to higher costs.
Cost-plus contract type carries inherent risk of cost overruns.

Frequently Asked Questions

What is this federal contract paying for?

Department of Defense awarded $32.0 million to LOCKHEED MARTIN CORPORATION. DMS MANAGEMENT JUL2019-JUN2020

Who is the contractor on this award?

The obligated recipient is LOCKHEED MARTIN CORPORATION.

Which agency awarded this contract?

Awarding agency: Department of Defense (Department of the Navy).

What is the total obligated amount?

The obligated amount is $32.0 million.

What is the period of performance?

Start: 2020-05-26. End: 2021-06-30.

What is Lockheed Martin's track record with the Department of the Navy for similar aircraft manufacturing contracts?

Lockheed Martin Corporation has an extensive and long-standing relationship with the Department of the Navy, frequently securing large and complex contracts related to aircraft manufacturing, maintenance, and upgrades. Their track record includes major programs like the F-35 Lightning II, P-3 Orion, and various helicopter platforms. While specific data on past contracts of identical scope and value is not provided here, Lockheed Martin is generally considered a reliable, albeit high-cost, provider of advanced aerospace and defense solutions. Their history with the Navy suggests a capacity to meet demanding technical specifications and delivery schedules, though performance can vary across individual contracts.

How does the value of this $3.2 million contract compare to other aircraft manufacturing contracts awarded by the DoD?

The $3.2 million value of this contract is relatively modest when compared to the overall spending in the aircraft manufacturing sector by the Department of Defense, which often involves multi-billion dollar programs for new aircraft development, production, and sustainment. This specific contract likely represents a smaller, more specialized need, such as the manufacturing of specific components, sub-assemblies, or modifications to existing platforms. While larger contracts often garner more attention, contracts of this size are numerous and essential for maintaining the defense industrial base and addressing specific operational requirements. Benchmarking requires detailed analysis of the specific services rendered.

What are the primary risks associated with this cost-plus fixed-fee contract structure?

The primary risks associated with a Cost-Plus Fixed-Fee (CPFF) contract structure, like the one used here, center on cost control and potential overruns. While the 'fixed fee' provides the contractor with a guaranteed profit margin, the 'cost-plus' element means the government bears the risk of all allowable costs incurred. If the contractor's costs exceed initial estimates, the government pays the difference. This can lead to higher-than-anticipated expenditures if not managed diligently. The risk for the government is that the contractor may have less incentive to control costs aggressively compared to a fixed-price contract, as their profit is guaranteed regardless of efficiency. Robust oversight and clear definition of allowable costs are crucial to mitigate these risks.

What does the 'Aircraft Manufacturing' NAICS code (336411) typically encompass in federal contracting?

The North American Industry Classification System (NAICS) code 336411 specifically covers establishments primarily engaged in manufacturing aircraft. This includes the manufacturing of complete aircraft, guided missiles, and space vehicles, as well as the manufacturing of aircraft parts and auxiliary equipment. In federal contracting, this code signifies work related to the design, development, production, modification, and repair of aircraft and their components. Contracts under this code can range from the assembly of entire planes to the fabrication of highly specialized parts like engines, avionics, or structural components, requiring advanced engineering and manufacturing capabilities.

What is the significance of the contract type 'COST PLUS FIXED FEE' for the government and the contractor?

For the contractor, a Cost-Plus Fixed-Fee (CPFF) contract offers a guaranteed profit margin (the fixed fee) regardless of the final cost of the project, provided they adhere to the contract terms and allowable cost principles. This reduces their financial risk, especially for projects with uncertain costs or scope. For the government, CPFF contracts are often used when the scope of work is not precisely defined at the outset, or when the costs are difficult to estimate accurately, such as in research and development or complex manufacturing. The government assumes the risk of cost overruns, but the fixed fee provides a ceiling on the contractor's profit. Effective government oversight is critical to ensure costs are reasonable and allocable.

How does the contract duration of 400 days impact the overall value and risk assessment?

A contract duration of approximately 400 days (roughly 13 months) suggests a project of moderate complexity and scope, likely focused on a specific production run, modification, or development phase rather than a long-term sustainment effort. This duration allows for a reasonable period to complete the defined tasks without extending the period of potential cost escalation or technological obsolescence. For risk assessment, a shorter duration generally implies lower overall program risk compared to multi-year contracts, as there are fewer opportunities for unforeseen issues to arise. However, it also means that the contractor must efficiently manage resources to meet the timeline, which can sometimes increase pressure and the risk of rushed work if not properly managed.

Industry Classification

NAICS: Manufacturing › Aerospace Product and Parts Manufacturing › Aircraft Manufacturing

Product/Service Code: AEROSPACE CRAFT AND STRUCTURAL COMPONENTS

Competition & Pricing

Extent Competed: NOT COMPETED

Solicitation Procedures: ONLY ONE SOURCE

Offers Received: 1

Pricing Type: COST PLUS FIXED FEE (U)

Evaluated Preference: NONE

Contractor Details

Parent Company: Lockheed Martin Corp (UEI: 834951691)

Address: 1 LOCKHEED BLVD BLDG 10, FORT WORTH, TX, 76108

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Manufacturer of Goods, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $32,015,586

Exercised Options: $32,015,586

Current Obligation: $32,015,586

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: N0001919G0008

IDV Type: BOA

Timeline